We are standing on a balcony outside Iceland’s Hellisheidi geothermal power plant, newly built on the side of an active volcanic mountain in Hengill. It’s pretty cold, but we are wreathed in warm steam that started out in the center of the Earth. Some of the turbines have been humming since 2006, but the plant is still under construction, on its way to producing 300 megawatts of electricity and (beginning in 2009) 400 megawatts of heat energy to warm factories and households.

Geothermal energy is not zero emissions, but it’s very clean in comparison to coal- or oil-fired plants being built all over the world. When it’s completed, the plant will emit 24,300 tons of carbon dioxide (CO2) per year, adding 0.74 percent to the country’s carbon burden. By contrast, the state of Kansas recently turned down a pair of 700-megawatt coal plants that would have produced 11 million tons of CO2 annually.

Although Iceland has vast geothermal potential and is only tapping a small percentage of it, this small country simply doesn’t need any more electricity generation for its population of just over 300,000. In fact, that’s why political leaders encouraged the construction of electricity-hungry aluminum plants (which currently consume 75 percent of Iceland’s power).

Iceland has cutting-edge technical knowledge about geothermal production, and that’s why its companies, banks and government officials are starting to look mostly at projects abroad. Glitnir Bank, for instance, has $40 billion in assets, and a focus on sustainable energy projects, particularly geothermal. The western U.S., for instance, is geologically favored. According to Glitnir, California has the potential of 7,500 megawatts of geothermal energy, more than Iceland’s 5,800 megawatts.

Glitnir projects that installed capacity of international geothermal could grow 16-fold in the next 20 years, with North America at the top of the list. Asia, southern Europe, eastern Africa and western South America all have strong geothermal resources, with a potential development of 148,500 megawatts.

Geothermal is 9.4 percent of U.S. renewable energy consumption today, but (despite the Bush Administration cutting the budget for geothermal research) it could go much higher. The states with significant resources (aside from California) are all in the west and include Nevada, Utah, Washington, Oregon and Alaska. As incentives, most of these states have Renewable Portfolio Standards, meaning that three to 20 percent of utility power must be renewable by a set date (2010 to 2020).

Audur Nanna Baldvinsdottir of Geysir Green Energy says her startup has $300 million to invest in geothermal projects. "We are a nouveau riche country whose government has made a decision to get good at geothermal," she says. "There’s not much development here in Iceland now, and that’s why we’re looking at the international market and especially the U.S., where there are 160 projects underway. They need reservoir engineers and geologists, which is what we have here." Geysir has projects underway in British Columbia and northern California.

Baldvinsdottir said she met recently with state officials in Utah. "They’re concerned that geothermal has something to do with Al Gore and people like that, but when they saw the energy numbers they were impressed," she says. California Governor Arnold Schwarzenegger, she added, is "kick ass" when it comes to geothermal enthusiasm.

Icelandic geothermal consultancy Enex, founded in 1969, has projects all over the world, and a part of the Hellisheidl plant. According to CEO Lãrus Eléasson, the company often works in joint ventures, and has ongoing work in Germany, China, Slovakia, Hungary and El Salvador. These projects vary considerably in size and location, depending on the resource. The Salvadoran binary plant generates eight megawatts and is in the heart of a dense, green jungle. Germany’s combined heat and hot water plant is south of Munich in Bavaria and produces six to 12 megawatts of electrical power and 30 megawatts for district heating (piping hot water to warm homes). On the western edge of the Salton Sea in southern California, Enex is working on a flash-type geothermal plant that will total 49 megawatts.

According to Dr. Pãll Valdimarsson, director of R&D for Enex, a large-scale district project is also underway in Xianyang, China, providing heat for three colleges. It has the potential to be the world’s largest such heating system by 2012 to 2015, serving 500,000 people.

Albert Albertsson, a veteran engineer with Hitaveita Suđurnesja, says his company, working with Dr. Wilfred Elders of the University of California at Riverside, is exploring a new form of deep geothermal drilling that would reach depths of 16,000 feet. Steam from that depth will be as hot as 842 degrees Fahrenheit, and will require highly specialized drilling equipment. But the dividend is 40 to 50 megawatts of electricity. "We have three new and powerful high-temperature geothermal fields that we will be exploring," Albertsson says. "And if we are successful, it could be a major step toward developing high-temperature resources worldwide."

Some of Iceland’s geothermal operations have borne unexpected fruit. For instance, its famous Blue Lagoon was formed by accident, as part of the operation of the Suñurnes Regional Heating Corporation (now Hitaveita Suđurnesja) near Reykjavik’s airport in 1976. The benefit of the lagoon for treating people with psoriasis was first noticed in 1981, when a patient chose to swim there "at his own risk." According to Blue Lagoon Managing Director Anna G. Sverrisdñttir, "A miracle happened—he had no more irritation or itching. And he’s still a regular bather here."

By 1994, the lagoon was famous as a tourist attraction and the first clinic for psoriasis patients opened. The next year, Blue Lagoon skin care products were introduced, and plans are to market them worldwide. (A U.S. launch is imminent.)

There’s a high level of silica in the Blue Lagoon’s geothermal seawater, which is 464 degrees Fahrenheit where it originates 6,500 feet down. The Blue Lagoon claims that the silica has exfoliating and deep-cleansing benefits. Blue Lagoon visitors rub themselves with silica-rich mud while bathing in the pool, and silica is the basis for many of the branded products.

Another key ingredient is algae. Dr. Gudmundur Omar Fridleifsson, the Lagoon’s chief geologist, experiments with the local strains of blue-green coccoid and filamentous algae (said to have anti-aging properties) for use in future products. The naturally occurring algae is grown in horizontal laboratory tubes, and Dr. Fridleifsson says he’s also interested in its cultivation as base material for biofuels.

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